Mazagon Dock May Bag $8-b P75I Submarine Project

Mazagon Dock May Bag $8-b P75I Submarine Project

Move will be a positive development for French shipbuilding major Naval Group with which the Indian shipyard has a partnership

by Nayanima Basu

The $8-billion ‘Project-75 India’ program by the Indian Navy that entails building six advanced submarines is likely to be grabbed by Mazagon Dock Shipbuilders Ltd (MDL) on a nomination basis even as private sector players are grappling with lack of orders.

The decision was taken last week at a meeting chaired by the Minister of Defence Nirmala Sitharaman where it was planned that the programme, also called as P75(I), will not be rolled out under Strategic Partnership (SP) Policy in the Defence Procurement Procedure 2016 as was initially decided, sources told BusinessLine.

“The Defence Ministry has now decided to withdraw the P75(I) Submarine Programme from the SP Policy that was originally mooted by former Defence Minister Manohar Parrikar and award the contract on a nomination basis to MDL,” said an official, who refused to be identified.

Technically the decision comes as a positive development for French shipbuilding conglomerate Naval Group with which MDL already has partnership under transfer of technology (ToT) arrangement for the ongoing $3.75-billion ‘Project 75’ or P-75l, in which six Scorpene-class submarines are being built.

The decision is expected to sound a death knell for players like Larsen & Toubro (L&T) and Reliance whose shipyards at Kattupalli and Pipavav respectively are reeling under heavy losses on account of lack of orders from the Defence Ministry, sources said.

“The private shipyards have become loss-making units with a turnover of ₹1,000 crore or less. There were expectations that the P75(I) will come to the private players under the SP policy but it seems that the plan is now shelved,” said an industry representative, who refused to be identified.

The P75(I) programme was announced in October 2014. Thereafter, in 2016 the Navy issued a request for information (RFI) to six global submarine makers seeking to build six advanced submarines with air-independent propulsion (AIP) technology, which enables the submarines to stay under water for a longer period. Besides, the proposed submarines will have a vertical launch system with a brand new cruise missile that will be used as the main anti-ship missile.

However, in October 2017 when the Ministry was being headed by Finance and Corporate Affairs Minister Arun Jaitley the government got responses to the RFI from France, Germany, Russia and Sweden.

Subsequently, the Defence Ministry started drafting the expressions of interest (EoI) to be issued to the Indian private sector shipyards for selection of the strategic partner with the appointment of SBI Caps as advisor. The final award for these contracts were aimed at creating submarine-building capabilities in the private sector to augment the pace of production that ails the government shipyards.

However, it seems now that Minister Sitharaman has decided to undo all that. Interestingly, the decision comes within less than a month of the French President Emmanuel Macron’s visit to India. The French, according to sources, pushed for the project aggressively during the bilateral meeting between Macron and Prime Minister Narendra Modi.